Triple-Witching Friday or is it Quad-Witching?

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 Friday June 18th was Triple-Witching Friday for equities as it experiences a huge volume spike in trading due to the confluence of three events

·         Expiration of single stock options

·         Expiration of Index Futures

·         Expiration of Index Options

This happens yearly on the 3rd of March, June, September and December. Stock option expiration may require stock delivery resulting in increased trading. While index futures and options are cash settled, all the open interest in derivatives require market makers to hedge positions with equities, that now needs to be closed, again resulting in heaving trading.    

Also to take advantage of this liquidity spike, some of the major indexes (below) also rebalance on these days. Index rebalances result in an additional 40%* Market-On-Close flow due to index funds. This additional event    

  • S&P US Indexes
  • FTSE Global Indexes
  • Nasdaq-100 (annual rebalance in December)

Here’s a table that shows triple-witch settlement activity. This and the “*” data is taken from Phil Mackintosh’s article on Nasdaq

Some quick facts about the volume spike:
  • Index futures and options trade as Open Auctions – and their volume is up 10 times to $28 Billion*
  • Single stock options trade as Close Auctions – and their volume is up 5 times to 80 billion*
  • Total daily equity trading volume is up 44%*



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